The Finance Bill, 2026 proposes to enhance the maximum penalty for non-compliance with information-gathering powers exercised by income-tax authorities under section 254 of the Income-tax Act, 2025. Currently, section 466 empowers designated officers to levy a maximum penalty of ₹1,000 where a person fails to furnish information sought during visits to business or professional premises. Recognising that the existing cap lacks deterrent value and does not adequately promote voluntary compliance, the amendment seeks to increase the maximum penalty to ₹25,000. The change is intended to strengthen enforcement of information-collection provisions while ensuring that penalties remain proportionate to the nature of default. The enhanced penalty framework aims to improve cooperation during on-site information collection and support effective tax administration. The amendment will take effect from 1 April 2026 and apply to tax year 2026–27 and subsequent years.
Increase in maximum amount of penalty in section 466 of the Act:
Section 254 of the Income-tax Act, 2025 (hereinafter referred as ‘the Act’) provides the power to the income-tax authorities to collect information from the premises where business or profession is carried out, by directing the proprietor or employee or any other person, who may at that time and place, be attending in any manner to, or helping in, or carrying on of such business or profession, to furnish certain information as authorized.
2. Further, section 466 of the Act provides for a penalty if any person fails to comply with the provision of section 254, i.e. power to collect information, and does not furnish the requisite information to the authorized income-tax authorities. The section further gives power to Joint Commissioner, Deputy Director or Assistant Director or the Assessing officer to impose maximum penalty amounting to Rs. 1000/-.
3. In this regard, it has been considered that the maximum amount of penalty should be proportionate to create adequate deterrence and voluntary compliances.
4. In view of the same, it is proposed to amend the section 466 of the Act so as to enhance the maximum amount of penalty to Rs. 25,000 from existing Rs. 1,000.
5. This amendment will take effect from the 1st day of April, 2026 and shall apply for tax year 2026-27 and subsequent tax years.
[Clause 90]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 90 of the Bill seeks to amend section 466 of the Income-tax Act, 2025 relating to penalty for failure to comply with the provisions of section 254.
Section 254 of the said Act provides the power to the income-tax authorities to collect information from the premises where business or profession is carried out, by directing the proprietor or employee or any other person, who may, at that time and place, be attending in any manner to, or helping in, or carrying on of such business or profession, to furnish certain information as authorised.
Further, the provisions of section 466 of the said Act provide for penalty on such persons who fail to comply with the provisions of section 254, that is power to collect information, and does not furnish the requisite information to the authorised income-tax authorities. The said section further empowers to the Joint Commissioner, Deputy Director or Assistant Director or the Assessing officer to impose maximum penalty amounting to ₹1000.
It is proposed to amend the said section so as to enhance the maximum amount of penalty from existing ₹ 1000 to ₹ 25000.
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
90. Amendment of section 466.
In section 466 of the Income-tax Act, for the figures “1000”, the figures “25000” shall be substituted.
